Government backtracks on indigenisation

via Government backtracks on indigenisation – The Zimbabwe Independent November 27, 2015

GOVERNMENT has yielded to sustained local and international pressure for consistency and clarity on the country’s indigenisation and empowerment policy compelling foreign investors to cede controlling stakes to black Zimbabweans, as the increasingly desperate Treasury moves in to lure critical foreign direct investment (FDI) inflows.

Bernard Mpofu

Reforms on the populist indigenisation law, gazetted in 2008 ahead of the country’s general elections, are seen as a catalyst to spur sagging FDIs. The law has been largely blamed for keeping investors at bay at a time the economy is imploding due to liquidity problems, among a host of ills.

Presenting the 2016 national budget yesterday, Finance minister Patrick Chinamasa said Indigenisation and Empowerment minister Patrick Zhuwao, who has declared there would be no going back on the policy, will next month announce new measures clarifying the law cited for spooking investors.

“Consultations towards strengthening and clarifying the processes of implementing the indigenisation policies in the other sectors of the economy outside the resources sector have been completed,” Chinamasa said.

“To this end, the Minister of Youth, Indigenisation and Economic Empowerment will be announcing and gazetting before Christmas the frameworks’ templates and procedures for implementing the indigenisation policies in a manner that both promotes investment and eliminates discretionary application of the law. Mr Speaker Sir, such measures will contribute immensely towards the ease of doing business in the country, and will render the services sector of our economy conducive for foreign direct investment.”

Treasury sees foreign direct investment inflows growing by a modest 3,8% to US$614 million next year after government reviews the indigenisation policy.

Zimbabwe’s FDIs, according to the latest United Nations world investment report, leapt to US$545 million in 2014 — less than 5% of the country’s GDP from US$400 million in the previous year, driven by interest in mining, infrastructure and services, but still lags behind by far regional rivals.

Reforms on the controversial law are also part of the far-reaching changes that government committed to in attracting fresh funding from international financial institutions.

Zimbabwe’s virtually broke government last month approved in cabinet an ambitious external arrears clearance strategy to pay off US$1,8 billion overdue to multilateral creditors by June next year, in a desperate bid to break its vicious debt cycle and secure at least US$2 billion in new funding to rescue a crumbling economy ravaged by recession, a liquidity crunch and deflation, among a plethora of other chronic problems.

The debt strategy is anchored on the Staff Monitored Programme, Zimbabwe’s latest economic blueprint ZimAsset and President Robert Mugabe’s threadbare 10-point plan, which among other issues deals with reforms on labour, ease of doing business, indigenisation, alignment of laws with new constitution, compensation for dispossessed white farmers, strengthening of the financial sector, revival of agriculture and re-engagement of the international community.

The country’s debt arrears amount to US$5,6 billion split between multilateral creditors (US$2,2 billion), the Paris Club, an informal grouping of bilateral creditor nations (US$2,7 billion), and non-Paris Club creditors (US$700 million).

The country has arrears estimated at US$1,8 billion with its three preferred creditors, the International Monetary Fund, World Bank and African Development Bank.